In a significant shift, the median basic pay award has dipped below 6 percent for the first time this year, settling at 5.7 percent during the three months leading up to July 2023, according to the latest findings from XpertHR.
This comes after a consistent six consecutive quarters of 6 percent pay increments.
This news comes in tandem with official reports indicating a gradual decline in inflation – a welcome development for employees who have endured a prolonged period of diminishing real-term pay. The most recent data from the Office for National Statistics (ONS) reveals that the consumer prices index (CPI) registered at 6.8 percent in July 2023, down from June’s 7.9 percent, while the retail prices index (RPI) dropped from 10.7 percent to 9 percent. However, despite these favourable shifts, pay raises are expected to continue trailing behind inflation in the immediate future.
Nevertheless, the outlook for employees is showing signs of improvement. XpertHR’s inflation forecasts predict that the RPI will stabilise at 6.2 percent by Q4 2023. As pay settlements established in April typically extend for a year, this suggests that the gap between wage growth and inflation should gradually narrow throughout the remainder of the year.
The latest rolling quarter data from XpertHR, based on 54 pay awards encompassing over 500,000 employees with effective dates ranging from May 1 to July 31, 2023, also reveals several key insights:
- 5 percent remains the most prevalent pay increase, comprising 15.8 percent of settlements, maintaining consistency with the prior month’s analysis.
- Approximately three-quarters (75.7%) of settlements exceeded those offered in 2022 for the same employee group, showcasing a positive trend.
- The interquartile range, spanning the middle 50 percent of pay awards, has narrowed slightly, with the lower quartile at 4 percent and the upper quartile at 8 percent. The corresponding figures in the previous month were 5 percent and 9 percent, respectively.
- Noteworthy is the fact that about one in 10 settlements (10.5%) exceeded 10 percent, with the highest pay increase standing at 13.6 percent.
What about the public sector?
Turning to the public sector, the median basic pay award climbed to 5 percent in the year leading up to July 2023. This represents a significant shift from the previous year when the median award was 3.2 percent in July 2022. By comparison, pay awards in the private sector reached 6 percent.
In recent news, the government approved recommendations from independent pay review bodies, leading to pay awards ranging from 5 percent to 7 percent for various groups including the armed forces, prison officers, senior civil servants, teachers, police officers, doctors, and dentists in 2023. However, for many of these workers, these increases might still translate to real-term wage cuts given the prevailing inflation rates.
Commenting on the data, Sheila Attwood, XpertHR’s Senior Content Manager for Data and HR Insights, noted:
Although recent reports from the ONS indicate record-high pay growth, our findings suggest that pay awards are likely to have peaked, with a decrease in the median pay award documented for the first time this year. Despite this, both sets of data highlight the fact that pay continues to lag behind inflation, placing many employees in a challenging position to manage living costs. While a narrower gap between pay awards and inflation seems imminent, employers have an opportunity to provide further support beyond pay, including benefits, training, and flexibility to bolster employee retention.”
Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at the University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.